Small businesses of all kinds depend on technology and equipment to keep their businesses running. While the initial hardware cost is likely included in your startup funding package, eventually there will come a time when you will need to consider replacing or upgrading your existing hardware. Unfortunately, financing new equipment is a major hurdle many business owners face.
If you need to upgrade your equipment, take the time to consider whether an upgrade is really necessary and the financing options available to you.
It's difficult to determine the exact "right" time to upgrade your business equipment in America. You may have equipment you use every day that needs a lot of attention, and equipment you use only occasionally. To do this, you must maintain a balance between old and new creations.
It's important to remember that missing or obsolete equipment can have a significant impact on your business. For example, you may not have enough hardware to scale your business the way you want.
Even outdated equipment can become inefficient and disrupt your business. If technology or machines can't keep up with the work, potential profits may be missed. If you're looking to grow your business, pay close attention to how your hardware affects overall efficiency and scalability.
Another clear sign that your hardware needs an upgrade is when it starts to break down. If your everyday equipment stops working, your business will stop working and you will lose money due to failure.
On top of that, you’ll probably start pouring money into repairs and replacement parts.
When it’s time to upgrade your equipment, you’ll need to figure out which financing method is right for you.
Buying new equipment outright is the most common option, although it is cost-prohibitive for many smaller companies. Because many business owners don’t often have the cash to buy new equipment up-front, you might need to consider applying for a small business loan (certain requirements apply) or capitalizing your business through a self-directed funding structure like a rollover as business startup (ROBS). These setups allow you to buy entirely new equipment and claim it as a business asset on your taxes.
Of course, there is another option called equipment rental. This allows you to rent the equipment your small business needs and make stable monthly payments for the duration of the contract. You are not required to purchase equipment at the end of the lease, but you can do so if you wish.
Equipment leasing isn't right for every business, but it can be a great option for some. For example, if you do not have the initial capital or collateral required to purchase equipment, leasing can solve that problem.
Leasing is also ideal if your business requires additional equipment for a seasonal or limited time basis, or if your equipment/technology is updated frequently. This way, you can keep up with the times by not buying equipment that you won't be using for months or years.
Ultimately deciding to upgrade your equipment and the funding method you use to do so will all depend on your business plan and growth plan.
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